Published on December 14, 2007
It will be a tough call. Yet most observers believe that that the Court is not likely to order a de-listing of PTT. Removing PTT from the stock market would cause adverse consequences and far-reaching damage to the Thai economy as a whole.
PTT, as one of the biggest companies on the stock market, accounts for about 16 per cent of the market's capitalisation. A ruling against PTT's privatisation would send a bad signal to the investing public about Thailand's economic policy.
Confidence would evaporate. Future privatisation would be undermined. And future governments would find it extremely difficult to regain credibility in regard to the country's economic management.
However, the six members of the consumer group who filed the suit against PTT's privatisation last year have strong grounds to petition for a de-listing. But PTT has already become a publicly listed company and has advanced along that path to a point of no return.
This case is not similar to that of the Electricity Generating Authority of Thailand Plc, the power agency. The Supreme Administrative Court blocked the privatisation of Egat last year on the grounds that the process for the agency going public was not handled in a proper or transparent way. There was also no independent agency to oversee a level playing field in the power industry.
The ruling on Egat dealt a huge political blow to the Thaksin government, adding more salt to the wounds suffered from the sale of Shin Corp to Temasek Holdings of Singapore.
From the outset, the privatisation of PTT was not transparent and was not properly handled by the Thaksin government. PTT had failed to divest its gas transmission pipeline, considered a state asset, as legally required before going public. At that time the Thaksin Cabinet could do anything it wished.
The public was also led to believe that PTT would privatise only 25 per cent of its holdings, leaving the Finance Ministry to control the remaining 75 per cent stake. As it turns out, the Finance Ministry has, for reasons still to be fully explained, gradually reduced its stake in PTT until it now controls only 52.77 per cent.
If the public had been told in advance that the Finance Ministry would eventually reduce its stake to only slightly more than 50 per cent, then PTT's privatisation would never have seen the light of day.
I am not sure yet how the Thai people in general have benefited from PTT's privatisation. If PTT's privatisation had been properly handled, we should have had teachers' funds or cooperative funds holding the stocks.
Who has reaped the benefits from this huge dilution of the Finance Ministry's PTT stake? We all know that the previous government was good at converting state assets into private assets for the benefit of its cronies.
In the worst-case scenario, a de-listing of PTT would require the Finance Ministry to buy back the 47.23 per cent of stocks, which would be worth around Bt485 billion.
Where will the money come from? This buyback cost is not a small sum of money at all, exceeding 25 per cent of the annual budget of the government as a whole. In this case, the state would be reluctant to buy back PTT's shares.
Other privatisation programmes under the same law - such as those for MCOT, AOT, CAT, TOT and Egat - would face adverse prospects too if PTT were to lose its case in the Supreme Administrative Court.
If PTT "wins" the verdict, would it then be required to divest its gas transmission pipeline? If this happens, Siam City Securities says PTT would have to pay tax arising from the transfer of the gas transmission pipeline to a subsidiary, amounting to Bt12 billion. This would hurt PTT's profit per share by Bt4.26.
The net asset value of the gas transmission pipeline is estimated at about Bt170 billion, or Bt60 per share.
With positive thinking and optimism, I do hope that the Supreme Administrative Court will spare PTT from the wrath of de-listing. It is an irreversible case.
Let's focus on future privatisation. This time we have to make sure that each privatisation issue is handled properly and with the best interest of the Thai people in mind.